Risk management in Toyota Essay Example | Topics and Well Written Essays - 3000 words

Risk management in Toyota - Essay Example The quality of the Toyota cars, introduction of premium brands like Lexus in tune with the tastes and fashions prevailing in the American markets, its collaboration with the leading player General Motors subsequently, entrenched the brand ‘Toyota’ firmly into the USA. The success story of Toyota could be summed up from one of its slogans in the 1980s â€Å"Who could ask for anything more†. The product profile of the company has undergone changes to include larger and luxurious vehicles. The corruption charges leveled against the UJF Bank, one of the largest shareholders of Toyota with Toyota’s Chairman as a director was a setback to the company’s diversification strategy into financial services. Also, the over concentration in the already developed American and European markets over the period of time could strategically affect its leadership position in the global market in future. The financial risk is related predominantly to the issue of capital structure and leverage, but the business risk largely dependent upon the economic conditions, and the study of risk management in relation to a company like Toyota needs to focus on the macro economic factors. This paper seeks to analyze risk management perspective of the company in relation to the prevailing global economic conditions, its strategic outlook to changes in the environmental factors globally and other internal factors related to risk management. Currents status and evaluation of risk management The international economy has undergone drastic changes in the recent years consequent upon the stupendous growth of emerging economies, especially the BRIC (Brazil, Russia, China and India) countries and the credit squeeze in the aftermath of subprime crises in the developed nations. However, it is pertinent to note that the emerging economies have not been affected by the subprime crisis, as these countries have been insulated from the world economy by virtue of the continuin g regulations in these countries, especially in the financial services sectors, and their exposure to international banking system has been very limited. A cursory glance of US Vehicle Sales from 1984 to 2010 from Penton Media (2011), as given in Appendix I and II, which more or less coincides with Toyota’s establishment in the USA reveals the growth (or lack of growth) over the period of time. Competition The market for Toyota is very competitive. For example, Toyota’s competitors Suzuki of Japan and Hyundai of South Korea have well established facilities for manufacturing, marketing and servicing in India. The local manufacturer Tata Motors has aggressively priced its small car Nano around INR 100,000 which works out to just US$ 2400 approximately. Volume is going to be the name of the game in the emerging economies like India, China and Brazil. Jie, R. (2010) reports: â€Å"China has overtaken the United States and Japan to become the world's largest car manufactur ing country in 2009.† While Toyota was concentrating more and more on developed markets, its competitors have made inroads into the emerging markets, where Toyota is lagging behind the local as well as the international players. Realizing the potential in the small car segment in India, Chevrolet has introduced the model ‘Spark’ at INR 279,000 which works out to US$ 6200 approximately since ‘value for money’ or pricing is a crucial factor in influencing the consumers’